Starting to plan for retirement

Assignment Help Financial Management

Reference no: EM131500947

You are 25 years old and expect to retire at 70 with a 20 year retirement. You are just starting to plan for retirement and have no money in the plan yet. You expect to earn an average of 7% in accumulation and 4% in retirement.

(a) If you want a retirement income of $100,000 per year how much will you need the day you retire and how much must you contribute during accumulation? $1,359,033 and $4,756 per year.

(b) You are now 45 and have been contributing the amount you calculated in part (a). You have $200,000 in the plan. Can you still expect the $100,000 per year with the same contributions? Yes

(c) A bad week in the stock market takes away 30% of that $200,000. If you decide to increase your contribution to make up for it, what is the new contribution? $9,474 per year.

(d) If you stick to your contribution from part (a), can you retire two years later with at least $100,000 per year income? Almost, projected income is $96,703/yr.

Reference no: EM131500947

Questions Cloud

Why did you choose kidder or nash : Why did you choose Kidder or Nash? What differences did you find when analyzing the situation under guise of either Kidder or Nash, and what actually happened?

Style app for proposed change in the company : Marioff hotel are trying to use the new Air B B style app for a proposed change in the company.

Considering the purchase of new machine : Co Z is considering the purchase of a new machine. Show the cash flows for each period.

Considering the replacement of an old machine : You are considering the replacement of an old machine that has a current book value of $7,000 and a market value of $9,000.

Starting to plan for retirement : You are just starting to plan for retirement and have no money in the plan yet. You expect to earn an average of 7% in accumulation and 4% in retirement.

Would the yield to maturity have been the most likely return : Would the yield to maturity have been the most likely return, or would the yield to call have been most likely?

Explain why banks are inherently unstable : Explain why banks are inherently unstable

A perpetuity has an original face value : A perpetuity has an original face value of $1,000.00 and original yield of 6%.

What is cost of common equity : Summerdahl Resorts' common stock is currently trading at $27.00 per share. What is the cost of common equity?

User Account

All Pages